As 2015 draws to a close we’ve taken a look at which funds proved a hit with our clients who use the Bestinvest Online Investment Service to make their own decisions and can reveal the 10 funds, collectively representing £60 billion of assets, which topped the fund charts this year. Of these, equity funds led the popularity stakes representing eight positions in the top ten, joined by a property fund and an absolute return fund, with not a single bond fund in sight.
Coming in at number 10 was the Henderson UK Property fund, which invests in high quality commercial properties with strong tenants on long leases with the goal of achieving a steady income from rents. 58% of the exposure is to London and the South East of England, with properties like 440 The Strand, the home of upper crust bank Coutts, and the headquarters of the London Fire Brigade, 169 Union Street. The fund has recently acquired student accommodation in Kingston, adding to similar assets in Exeter and Glasgow. Overall around 28% of the property is exposure to retail outlets, 28% office blocks and 16% industrial properties. The average unexpired lease on the portfolio is 11.1 years with vacancy rates of 2.3% which is well below the Investment Property Databank average vacancy rate of 9.5%.
Rolling in at number 9 was the AXA Framlington Biotech fund, the only fund in the top ten not to hold a rating by Tilney Bestinvest’s research team and perhaps a surprising choice given the high risk and specialist nature of the fund. The fund has a global mandate but is 87% exposed to US companies, reflecting America’s world leading position in biotechnology. Potential investors should also be aware that this is very concentrated fund, with 60 holdings overall but 28.3% of the fund invested in the three largest stocks. The fund has recently increased its position in Celgene Corp, which manufactures cancer drugs, to 9.7% of the fund following share price weakness caused by safety concerns reported in Phase III trials for its lead drug solthromycin. Other large holdings are Gilead Science Inc, which concentrates on producing antiviral drugs to treat sufferers of HIV, and Biogen which provides therapies of multiple sclerosis, non-Hodgkin’s lymphoma and rheumatoid arthritis.
At position 8 is another fund from AXA, this time the AXA Framlington UK Select Opportunities fund, managed by veteran stock picker Nigel Thomas who sports a track record of over 28 years investing in UK shares. Although the fund is now a big beast at £4.2 billion, this certainly isn’t a quasi-tracker. Thomas takes a high-conviction approach and the fund has sizeable exposure to medium-sized companies which represent 41.6% of the fund, compared to 16.7% mid-cap exposure in the FTSE All Share Index. He has wisely avoided oil and commodity companies, which have had a dreadful year, and has been heavily underweight banks. Instead, big positions in the fund include ITV, online sports betting service Betfair (which is the process of merging with rival Paddy Power) and popular property website Rightmove.
Did I just mention trackers? The number 7 fund in our most popular funds list was HSBC American Index, the only index tracker in the top ten. With even legendary investor Warren Buffet advocating low cost S&P 500 index trackers for long term investors in the US stock market, it is no surprise that our DIY investors have taken his tip on board. The record of active fund managers in the US market is not great (to put it lightly). Thanks to a price war amongst tracker providers, the ongoing costs for this fund have been shaved back to a tiny 0.08% per annum.
At number 6 is the Liontrust Special Situations fund, which this year celebrated its 10th anniversary with good reason: the fund has delivered an alluring “win-win” combination of significant outperformance of the FTSE All Share Index (a 10-year total return of 226% compared to 81% from the FTSE All Share Index), but also with much lower volatility than the index and a particularly strong track record during tougher market conditions. The managers Anthony Cross and Julian Fosh have a very clear investment philosophy which they call the “Economic Advantage” approach. This seeks to identify growth companies with significant intangible strengths that are hard for competitors to reproduce. These qualities might include intellectual property, distribution channels or high recurring revenues, which provide serious barriers to competition. The fund invests right across the UK market in search of such gems, and includes significant exposure to smaller companies. When they back a smaller company they apply an additional rule, which is that the managers of the business must own at least 3% of the business, as they want to see that the managers have skin in the game. They seek to avoid businesses taking excessive risks including those that make serial acquisitions.
At the half way mark, in fifth place, is the Threadneedle UK Equity Income fund, managed by Richard Colwell, which is one of two funds from the Columbia Threadneedle stable in the hit parade. Colwell has a pragmatic approach to managing the fund, and avoids being labelled as either a growth or value manager. Although the fund has income-generation as part of its brief, it is managed very much with total return in mind. The fund is relatively concentrated with 51 holdings and is currently overweight consumer services, industrials and healthcare, and heavily underweight financials and oil and gas. Key holdings including Imperial Tobacco, Astrazeneca and WM Morrison Supermarkets. Colwell expects the recent spate of large mergers & acquisitions to continue and believes the fund is well positioned to benefit from this.
Number 4 is the Stewart Investors Asia Pacific Leaders fund, managed by industry stalwart Angus Tulloch, who ranked first place in our recent Top 100 Fund Managers research report. In a turbulent year for Asian markets, Mr. Tulloch’s cautious approach paid off, helping investors weather the storm. It has recently been announced Tulloch will step down from lead management of the fund next summer, while remaining part of the Stewart Investors investment team. He will hand the baton to David Gait, a manager with a very strong track record in his own right who should prove a worthy successor.
In third place is the gargantuan, £26.5 billion Standard Life Global Absolute Return Strategies fund (“GARS”), an umbrella for 34 underlying individual investment strategies that encompass equities, bonds, and currencies, with the goal of collectively generating positive cash-beating returns across different market environments, with low volatility. Although the industry has spawned numerous competitors from the likes of Invesco Perpetual, Aviva and JP Morgan, GARS remains the market leader.
At number 2 is the Threadneedle European Select fund managed by Dave Dudding. Europe has returned to prominence with investors this year as the European Central Bank finally relented and launched the kind of money-printing blitz that had been previously put in place in the UK, US and Japan and that is credited with having boosted stock markets in those regions. The fund is a concentrated portfolio of circa 40 mostly larger European companies, with strong competitive advantages, recurring revenues and consistent above average earnings growth, which the manager typically holds for a very long time, with low portfolio turnover. Well recognised brands often fit this profile and constitute a large proportion of the portfolio. These include Unilever, whose diverse brands include Marmite, Wall’s ice cream, Persil and PG Tips; Richemont, whose luxury brands include Cartier, Jaeger-LeCoultre and Montblanc; and brewer Anheuser-Busch InBev, which is in the midst of a mega merger with SABMiller.
Finally, in the number 1 slot is… you guessed it: the CF Woodford Equity Income fund managed by Britain’s most well-known fund manager, Neil Woodford. Woodford’s devoted fan club has been well rewarded for placing its faith in this first fund from his eponymous new venture Woodford Investment Management. Although there are no guarantees over future performance, this fund has delivered an impressive total return over the last 12 months, a period when the benchmark FTSE All Share Index barely trod water.
Find out more about how we rate funds here: /investment-research/our-research-approach